Which of the following must necessarily occur as the quantity of output increases?
a. Average total cost must rise.
b. Average variable cost must rise.
c. Average fixed cost must fall.
d. Marginal cost must rise.
Ans: c. Average fixed cost must fall.
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Assume that there are only two good for a consumer to purchase. Explain why a consumer can not be maximizing utility if both goods are inferior.
What will be an ideal response?
One way to minimize the deadweight loss resulting from a specific tax is to
a. tax only wealthy firms and individuals. b. spread the tax over many goods and services. c. tax goods for which either supply or demand is inelastic. d. tax luxury items such as yachts and sports cars.
For a monopoly producing any output level greater than one, the marginal revenue curve:
A. lies below the demand curve. B. is minimized when total revenue is maximized. C. lies above the average revenue curve. D. is the same as the demand curve.
How is monopolistic competition like perfect competition? How is it like monopoly?
What will be an ideal response?